The effect of the 2022 energy crisis on electricity markets ashore the North Sea

Abstract

The European internal energy market has undergone institutional redesign during the last 30 years. It has the objective to deliver secure, affordable and increasingly decarbonized energy supply. Europe experienced its first inherent energy crisis after the global oil price crisis half a decade ago. With skyrocketing energy prices during 2022, electricity generation in Europe was under extreme stress. In this paper we analyse flows and prices of electricity in six distinctive (with respect to generation portfolios) European countries from 2018 to 2022 and investigate if market signals (prices) contributed to security of supply. For a long time, sceptics have argued that liberalized markets would not be able to provide security of supply, and this has not been challenged by real world events thus far. Our empirical results suggest that electricity did indeed move along cross-border transmission lines as the theory suggests, and that cross-border transmission lines were utilized as during normal periods. This is relevant for the current debate on restructuring energy market design and protecting consumers from volatile prices.